Nonprofit sector collectively describes the institutions and organizations in American society that are neither government nor business. A nonprofit is an organization that exists to benefit the public and isn’t in the business of making money. Any profits it earns aren’t distributed to shareholders, like a for-profit business does; rather, any profits are used to further the organization’s mission or charitable purpose.

Because nonprofit organizations offer programs and services that otherwise would have to be provided by the government, the government excuses them from the taxes that for-profit businesses must pay. A private foundation receives this special tax-exempt classification when created, and with this classification comes a responsibility to act on behalf of and uphold the public trust.

Nonprofits come in all shapes and sizes. Some are small, community-based organizations run by volunteers, and others are large, complex, professionally run businesses. Internationally, nonprofits are often referred to as NGOs (nongovernmental organizations).

What are some different types of foundations and giving?

  • Independent or family foundations are formed with money given by individuals or families, and, if a family foundation, it is usually run (governed) by family members themselves.
  • Company-sponsored or corporate foundations receive funds from their parent companies, although legally they are separate organizations.
  • Community foundations seek support from a variety of donors, and they also give grants to organizations in the town, county, or region they are located. Community foundations are considered public charities, not private foundations. Community foundations offer individuals and families something called a donor-advised fund—allowing them to donate charitable dollars without having to set up their own private foundations.
  • Giving circles are groups of people who pool their charitable donations and decide together where to allocate the money.
  • Individual giving is just that—charitable giving done by individuals. This is by far the most common type of giving.

Read the full article about nonprofit sector basics at Exponent Philanthropy.